Market Economies and the Value of Welfare Programs

Profits over Production

The modern agricultural system is largely market driven and privately owned – allowing for the quantity, quality, and diversity of produce enjoyed through much of the developed world. However, the same market forces that allow for such quality also heavily incentivize the firms producing food to focus on maximizing profits over production, as increasing the supply both lowers prices and raises the cost of the required resources (Figure 1). Furthermore, the wealth disparities inherent in liberal economies creates a rung of society that often lacks the means to purchase even the most fundamental necessities – regardless of the price (Young, 1990). The net result is such that the free market is unable to provide food for all even when such production is technologically achievable.

Figure 1 illustrates that the free market finds an equilibrium between demand and supply that maximizes profit and is not set to maximize quantity (Asmundson, 2012)

Crafting Welfare Policy

In response to these artificial constraints, a set of welfare policies were enacted in much of the developed in world from the 1920s – 1970s (Young, 1990). In the United States, for example, the Johnson administration passed the Food Stamp Act of 1964 which provided food for four million of the poorest citizens (USDA, 2014) by distributing vouchers redeemable for consumable goods. The following decade saw the passage of two extensions to the bill: the Agriculture and Consumer Protection Act of 1973, which expanded eligibility to the fifteen million poorest Americans in all fifty states, and the Food Stamp Act of 1977, which created extensive outreach and support programs. Together, the three bills virtually eliminated hunger in the United States (Young,1990).

Scaling back Policy

Throughout the 1980s, in an attempt to curb extensive government spending many national programs, including the food assistance, were cut (Economist, 2013, USDA, 2014). As a result, the modern version of these welfare programs, present in the US Farm Act of 2008, enacted heavy spending cuts, introduced means benefits, and limited outreach to those eligible (Coleman-Jensen, 2015). These changes have been detrimental to the welfare of the poorest Americans as self-reported rates of food insecurity have risen from nearly nonexistent to about fifteen percent today (Young, 1990).

Recommendation

Food Stamps are an effective method in tackling hunger, but they have been limited in recent decades by budget cuts. These cuts have reduced the value of the average voucher by a twenty-five percent from their peak in the 1970s (Young, 1990, Center on Budget and Priorities, 2015) and the result has led to a significant increase in the nutritional deficiency of those participating in the program (Andreyeva, 2015). A secondary issues is the participation rate which has dropped to about half of those eligible. The rate has dropped steadily since the revisions of the food stamp program in the 1980s which limited canvassing, multilingual support, and nutrition education materials.

The solution resides in a multistep approach. Primarily, the reallocation of funds from food pantries and soup kitchens which have been proven inefficient in comparison to food stamps and were given significant funds from governments after the downscaling of SNAP program (Young, 1990). Furthermore, the volunteers staffing these facilities may then be persuaded to spread information about these programs, hoping to increase the participation rate. The program currently consumes .5% of the federal budget and at the current rate, the program will also increase in resources per person as less people need food stamps as the economy recovers from the crash of 2008 (Center on Budget and Priorities, 2015). In the long run, however, if we wish to provide food for all, regardless of their circumstance, there shall be a need for higher taxes.